Denver Real Estate Market Pulse – July 2021
If you have been reading up on the latest real estate trends, you might think the market in Denver is grinding to a halt. However, that is not the case, and we’ve compiled some numbers to back that up.
Inventory Growth is Relative
Inventory grew substantially from June, up nearly 50%. However, the month ended with roughly 3,100 active listings. We typically see a spike this time of year, however the 50% number is misleading because we came from such low inventory. The 3,100 active listings mark is still roughly half of what we had at this point last year. For reference, we need to be around 16,000 listings to reach a buyers’ market.
Appreciation is also slowing. In June we saw the average home price increase 3.5% to $643k and the median rise 1.5% to 545k. These are still great numbers, but not the 5 to 10% we were seeing earlier this year or the whopping 16% escalation we saw in April alone!
More Inventory Equals Changing Bids
As the real estate market in Denver changes, buyers are starting to change how they bid. While there is still the occasional home that gets 8 offers and sells at $75k over asking price, the increase in inventory has brought more choices and diluted the pool. Earlier in the year, there may have been 1 or 2 available houses in a neighborhood, but now there are 3 to 5. This means buyers may have the ability to be slightly choosier.
For those of us who have been in this market for a while, this is nothing new. Our market has always been a function of seasonality. The numbers and activity agree with what we typically see – a cool down after the 4th of July weekend and a trickling decline from the holiday season through late February.
The Denver Real Estate Market is Shifting
The market is indeed shifting, and when it shifts there are always questions about the unknown. Until the market stabilizes, we won’t know what level is ‘normal’. So during these adjustments, some questions naturally arise: If the market does slow down, should that scare me? As a seller, am I losing equity? As a buyer, am I buying at the peak of a market, only to lose value down the road?
In our opinion, this is not a bubble situation – instead it’s more of a slowdown. We also believe this to be a positive that the market needed. The appreciation we saw this year is unsustainable, because when prices and rates start to feel uncomfortable, there will be a decrease in what people are willing to pay for homes.
What the Shift Means for Sellers?
With this shift in the real estate market, you could see a couple of things. For a seller, a home may sit on the market for more than a weekend. Sellers could also see fewer multiple offer situations where people offer $20k, $30k, or even the crazy $75k over asking price. Instead, you may see more home selling near their list price. Also, you might not see the $100k per year appreciation on a new purchase, but you can expect growth in the $25k to $50k range. The typical appreciation in Denver is 6% per year. So for a median home of $545k, you would expect to see the value of the home increase to around $585k after one year.
What the Shift Means for Buyers?
This is the moment buyers’ have been anticipating since the housing market explosion. More liquidity in the market allows them more options, time and leverage. Instead of picking between a handful of homes, buyers should have more options and have time to see a house more than once before submitting an offer.
A cooler market could offer a few other buffers as well. For example, buyers may not have to write in a $40k appraisal waiver, or maybe they can come in at asking, with an escalation clause, and still get the property.
Denver is Historically a Sellers’ Market
Denver has historically been a sellers’ market. To illustrate the city’s strength, only 4 times in the last 30 years have we lost value. Of those 4, 3 times were less than 3%, while the other time was a 10% loss during the 2008 financial crisis.
Further, Colorado is #49 in mortgage delinquencies and our homeowners are blessed with nearly $1 trillion of equity. Because of these factors, distressed homeowners in Denver usually have the option to sell or refinance, which keeps distressed properties off the market.
In addition, net migration to Denver continues to increase our population while new construction struggles to keep pace. Finally, with the age of the average first time home buyer being 33 and the largest demographic being 29 years old, we are set up to continue this sellers’ market and price gains for the foreseeable future.
Timing the Denver Real Estate Market is a Fool’s Errand
If I bounced a ball on the ground and gave you a camera to take a picture of exactly when it bounces, the task is nearly impossible. The same goes for trying to time the real estate market.
As the Denver Real Estate Market starts to take the foot off the gas, ask yourself: how high or low would prices have to go to scare me? Our opinion, based on vast experience, is the best time to buy or sell a property in the Greater Denver Area is whenever you are ready. Unless you enjoy gambling, do not to try and time the market.
Contact the Property Consultants at Sophisticated Properties
At Sophisticated Properties, we’re more than just realtors™. So, if you are buying, selling, or looking to lease a luxury property in the Greater Denver Area, give our property consultants a call.
We can help you determine whether selling or leasing your luxury property makes the most sense. If you decide to sell or lease, we can provide quality buyers and tenants, and this makes life easy for you. For more information and to stay abreast of the Denver Real Estate Market, connect with us by joining our mailing list and following us on Facebook and Twitter.
New To Denver?
Moving to a new city can be daunting! We can help make that process a bit easier by offering a Denver city tour.
One of our consultants will give you a personal city tour which will include showing up to 4 places that match the criteria that you set up for us.
This tour will include taking you through Denver's iconic neighborhoods, landmarks, stores, restaurants, and areas with public transportation. This tour is 3 hours long and cost only $350. If you lease one of our available properties, that $350 will be credited back to you when you move in.